As more breweries open, are we nearing peak craft beer?
Published Friday, March 9, 2018 12:31PM EST
Call it the craft beer explosion.
Since the dawn of the millennium, Ontario has gone from having about a dozen microbreweries to rapidly closing in on the 250 mark.
Waterloo Region is no exception to the rapid rise of small-scale brewers.
When Block Three Brewing opened in 2013, it was one of the first craft breweries in the region. While that meant little competition and a strong sense of novelty, managing partner Derek Lebert says everyone involved knew that situation wouldn’t last.
“We were expecting that there would be other breweries opening,” he says.
They were right. The last few years have brought a bonanza of craft breweries to the area. According to the Ontario Craft Brewers trade association, there are now more than 20 microbreweries – defined based on output, ownership and beermaking process criteria – in Waterloo-Wellington.
“I think what the craft brewing industry is really answering is that yearning for something different – something local, something independent, experimenting with different flavours and different natural ingredients,” says the association’s president, Scott Simmons.
In addition to the beer itself being different, craft breweries are trying to stand out by offering their customers different experiences.
Many small breweries are opening restaurants, renting out their facilities as event space, and even holding special events of their own in attempts to bring customers to them, with the hope they’ll enjoy the beer and want more.
“They’re building an experience around the product,” says Geoff Malleck, a lecturer in the University of Waterloo’s economics department.
“We can sell our product, or we can enhance the buying experience by offering things like social gatherings, food servings, pairings and so on.”
Many craft brewers say this sort of extension of their beer business is necessary because Ontario’s beer regulations make it difficult to sell their product on the same scale as bigger brewers do.
When it comes to retail, brewers are limited to four options: opening their own stores, going through the LCBO, getting listed with The Beer Store, and convincing licensed supermarkets to sell their products.
The Beer Store and the LCBO only stock a limited number of beers from smaller breweries. Producers say the competition for those spots can be fierce – and the percentage of sales the retailers claim for themselves can make selling through them a less attractive financial proposition than it may first appear.
“It does eat up your margin quite a bit to be selling through the LCBO and The Beer Store,” says Lebert.
Steven Innocente agrees. He started brewing beer while living in Scotland in 2012, and returned to it in 2014 when he opened the Innocente Brewing Company in Waterloo.
Innocente has got its beer into the LCBO and some grocery stores, but he says he’d like to see more. Specifically, he says, he wants Ontario to loosen up its beer regulations and allow convenience stores to sell alcohol.
“If they can sell cigarettes, why can’t they sell beer?” he says.
“We need more retail outlets all over the province, and we’re not really getting that.”
In addition to the lack of retail options, Innocente says he’s concerned that too many people are trying to elbow their way into the crowded industry.
“I think we’re getting close to the limit,” he says.
The brewers’ association isn’t so sure. Simmons says Ontario’s craft market is still in its “growing stages”. He thinks the province could support 500 craft breweries – about double today’s number – without risking oversaturation.
Paul Deichert has a unique vantage point on the craft beer boom. He’s the head brewer at Waterloo’s Lion Brewery, which has been making beer in its most recent iteration for about 25 years.
He says he’s seeing people get into the craft beer game without fully understanding the expenses that go into it or how competitive the market can be.
“This isn’t (like) renting a bit of retail space and putting a sign up. It’s an expensive gig to get into,” he says.
“Some guys should just stick to it as a hobby.”
Deichert says he believes beer-industry giants will buy up the craft brewers they see promise in, while leaving the rest to struggle to keep themselves afloat.
According to Ontario Craft Brewers data, craft brewers currently make up a little less than eight per cent of Ontario’s overall beer market.
Simmons says he expects craft’s share to rise to 20 per cent as the industry grows – which would still leave it far below the 40 per cent figure he says is seen in some U.S. states.
With reporting by Marta Czurylowicz